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Bitcoin Rally to $23K Not Enough to Boost Trader Confidence

Bitcoin price has seen some bullish signals, but traders are only willing to add leverage longs after the Federal Reserve's decision on Feb. 1.

Bitcoin logo
Bitcoin logo

Bitcoin had a mixed reaction on Jan. 25 after the United States reported a 2.9% GDP growth in the fourth quarter, slightly better than expected. However, the growth was less than 3.2% from the previous quarter.

Federal Reserve and Oil Prices Impact Market

Investors' confidence was also limited by the likelihood that the U.S. Federal Reserve would not revert its contractive measures anytime soon after U.S. durable goods orders jumped 5.6% in December. Oil prices are also still a focus for investors, with West Texas Intermediate (WTI) approaching its highest level since mid-September.

Regulatory Uncertainty Limits Bitcoin's Upside

Regulatory uncertainty also played a role in limiting Bitcoin's upside. On Jan. 26, the Dutch central bank, De Nederlandsche Bank, fined Coinbase $3.6 million due to non-compliance with local regulations.

Bitcoin stands above other cryptocurrencies
Bitcoin stands above other cryptocurrencies

Derivatives Metrics Show Professional Trader Positioning

Considering derivatives metrics provides insight into how professional traders are positioned in the current market conditions. Margin markets allow investors to borrow cryptocurrency to leverage their positions. The current metric shows that stablecoin borrowing is favored by a wide margin, indicating that shorts need to be more confident about building bearish leveraged positions.

Options Markets Show Risk Aversion

Options markets can also provide insight into whether the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign when arbitrage desks and market makers are overcharging for upside or downside protection. Currently, the delta skew signals investors are pricing similar risks for the downside and the upside.

Bitcoin logo in front of the chart
Bitcoin logo in front of the chart

In conclusion, the lack of demand from margin traders willing to short Bitcoin seems promising, but at the same time, options traders need to be more confident to become optimistic. The longer Bitcoin remains above $22,500, the riskier it becomes for those betting on BTC price decline. Traditional markets play a crucial role in setting the trend, so the odds of another price pump ahead of the FED's decision on Feb. 1 are slim.